Top 10 risks and challenges of dealing with Far East suppliers
Prepare for challenges when dealing internationally with the Far East
In a recent interview, the CDS CEO / Managing Director was asked to give some advice on the risks and challenges of dealing directly with Far East suppliers, including some of the things that can and have gone wrong. Below, we have summarised Chris’s TOP 10 challenges, although, after consideration, it did run into 15! We hope this gives you some points to consider and the challenges to prepare for when carrying out such international trade. It should be noted that Chris has highlighted these points from his own experience and for the technical products he has imported and promoted for 30+ years. He cannot speak for any other specific industries and products. However, there will be several similarities and parallels regarding the risks and challenges involved.
Best regards
Meghan Mudge, Head of Marketing
The Risks and Challenges with Far East Suppliers
- Cashflow – You will unlikely get credit terms, so there is a cost and cash tied up before you receive products. This can be up to 6 months! But even if it is cash before shipment when the goods are “ready”, some of the risks below will still apply!
- After-sales support – Real technical support and troubleshooting from Far East companies can be good in price and lead time, plus maybe a sample, but less so in troubleshooting or technical support, especially when your products are in the field.
- Product Consistency – The samples supplied can vary from the production items supplied, which can create severe design/manufacturing issues, especially when they already have your money.
- Quality Control – this can be weak with simple, quick visual tests undertaken.
- Legal Recourse is very difficult – What happens if the company disappears or supplies you with unacceptable products but will not return your money?
- Miscommunication – Language barriers should not be underestimated, as they can lead to delays and wrong decisions at the factories.
- Time zone challenges – you often have a limited window when you can contact the factory, but do not expect an answer that day for the same reason.
- Due diligence and Quality Control – have you visited and audited the actual factory that will manufacture your products? How can you know it is not just an agent working out of his mother’s kitchen just because he has a website and speaks relatively good English? Have you built that cost into your product cost as it is a cost of sale?
- Customs and import issues – if they do not complete the paperwork correctly, products can sit in customs for weeks, either in the Far East or the Home country entry port.
- Repairs and returns – You should not underestimate the difficulty, time, and cost of returning products to China, which is very much set up for exporting and not receiving its own products back again!
- Freight costs – and management should also be calculated, including the time a distributor takes away and manages for you.
- Currency risks—the price can fluctuate between the quotation and the actual price, and you transfer the money so that the actual price can rise.
- Payment scams – It is not unknown for Far East companies to get hacked. If you transfer money to the wrong account, you will lose all your money as the factory never received it.
- Clarity of terms—This should be crystal clear, as any confusion can be costly and sometimes terminal, especially when they already have your money.
- Loss of money! – There have been examples of European companies losing huge amounts of money when dealing with Far Eastern companies. That risk never goes away, to be honest, but that is the risk of doing such business. Every company has to ask themselves, ” Can we take that hit?” If not, a local distributor provides the security of supply and after-sales service.
If you have any questions or require any advice, you can email Chris at info@crystal-display.com, and he will try to help you however he can.
For more information on our products and services, please go to www.crystal-display.com
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